Question 1

Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.

Accepted Answer

A) True 
 B)False

Question 2

GenerUs Inc.'s board of directors approved a charitable cash contribution to FoodBank, a qualified non-profit organization, in November of 2016. GenerUs made payment to FoodBank on February 2, 2017. GenerUs Inc. (a calendar-year corporation) may claim a deduction for the contribution on its 2016 tax return.

Accepted Answer

A) True 
 B)False

Question 3

Three brothers each own 20% of the stock in three corporations. Because no single brother owns more than 50% of a corporation, the tax law would not treat the corporations as a controlled group.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding controlled groups is false?

Accepted Answer

A)  	A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets. 
B)  	A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets. 
C)  	The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential. 
D)  	Disproportionate distributions will only occur in liquidating distributions. 
A)  	A disproportionate distribution occurs when a partner receives more than his proportionate share of the partnership's hot assets. 
B)  	A disproportionate distribution occurs when a partner receives less than his proportionate share of the partnership's hot assets. 
C)  	The tax provisions related to disproportionate distributions attempt to preserve the partners' share of ordinary income potential. 
D)  	Disproportionate distributions will only occur in liquidating distributions.

Question 5

A corporation with an AMTI of $400,000 will have all of its AMT exemption phased-out.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is false regarding corporate estimated tax payments?

Accepted Answer

A) The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 
B) Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000 (including the alternative minimum tax). 
C) Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end. 
D) Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters. 
A) The due dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 
B) Corporations must pay estimated taxes only if they have a federal income tax liability greater than $10,000 (including the alternative minimum tax). 
C) Even though a corporation extends its tax return, it still must pay its tax liability for the year by three and one-half months after year-end. 
D) Corporations using the annualized income method for determining estimated tax payments project their tax liability for the year based on income from the first, second, and third quarters.

Question 7

Accrual-method corporations cannot deduct charitable contributions until they actually make payment to the charity.

Accepted Answer

A) True 
 B)False

Question 8

Netgate Corporation's gross regular tax liability for 2016 was $95,375. What was its taxable income?

Accepted Answer

The answer of Netgate Corporation's gross regular tax liability for...

Question 9

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain other deductions).

Accepted Answer

A) True 
 B)False

Question 10

A corporation may carry a net capital loss back two years and forward 20 years.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

Accepted Answer

A) Approval of the payment from the board of directors. 
B) Approval from the IRS prior to making the contribution. 
C) Payment made within three and one-half months of the tax year-end. 
D) All of these are necessary. 
A) Approval of the payment from the board of directors. 
B) Approval from the IRS prior to making the contribution. 
C) Payment made within three and one-half months of the tax year-end. 
D) All of these are necessary.

Question 12

VitalJuice Corporation reports the following schedule of prior year taxes it owed:   
What is VitalJuice's tax liability for Year 4?

Accepted Answer

$750,000
Explanation: VitalJuice generat

Question 13

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

Accepted Answer

A) True 
 B)False

Question 14

WFO Corporation has gross receipts according to the following schedule:  
If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

Accepted Answer

A) Year 3 
B) Year 4 
C) Year 5 
D) Year 6 
E) None of these. 
A) Year 3 
B) Year 4 
C) Year 5 
D) Year 6 
E) None of these.

Question 15

IndusTree Inc. received $1,800,000 from the sale of a property in 2016. The property's adjusted basis for regular tax purposes was $200,000 at the time of the sale. The property's adjusted basis for AMT purposes was $290,000. What is the amount of the AMT adjustment due to the sale of the asset? Does it increase or decrease AMTI?

Accepted Answer

$90,000 decrease to AMTI
Explanation: Th

Question 16

Urban Corporation receives tax-exempt income from Denver municipal bonds. All the proceeds from the bonds were used to fund public projects. In computing adjusted current earnings in its AMT computation, Urban must add back the interest income from its municipal bonds.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding book-tax differences is true?

Accepted Answer

A) Corporations are not required to report book-tax differences on their income tax returns. 
B) Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C) Income excludable for tax purposes usually creates a temporary book-tax difference. 
D) None of these is truE.Temporary book-tax differences will eventually reverse; if a difference is favorable one year, it will be unfavorable in another. 
A) Corporations are not required to report book-tax differences on their income tax returns. 
B) Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C) Income excludable for tax purposes usually creates a temporary book-tax difference. 
D) None of these is truE.Temporary book-tax differences will eventually reverse; if a difference is favorable one year, it will be unfavorable in another.

Question 18

For corporations, which of the following regarding net capital losses is true?

Accepted Answer

A) A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
B) A corporation that experiences a net capital loss in year 4 first carries the loss back to year 3, then year 2, and then year 1 before carrying it forward. 
C) Net capital loss carrybacks are deductible in determining a corporation's net operating loss. 
D) Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expirE.Net capital losses create an unfavorable book-tax difference in the year they occur and a favorable book-tax difference in the year they are applied.These book-tax differences are temporary. 
A) A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
B) A corporation that experiences a net capital loss in year 4 first carries the loss back to year 3, then year 2, and then year 1 before carrying it forward. 
C) Net capital loss carrybacks are deductible in determining a corporation's net operating loss. 
D) Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expirE.Net capital losses create an unfavorable book-tax difference in the year they occur and a favorable book-tax difference in the year they are applied.These book-tax differences are temporary.

Question 19

Imperial Construction Inc. (IC) issued 100,000 incentive stock options (ISOs) to its employees on January 1, 2016 with an estimated value of $5.50 per option. The options vest (accrue) at 25 percent per year for four years (beginning in 2016). Each option allows the holder to purchase one share of stock at $8. On January 1, 2017, employees exercised 12,500 options as IC's stock price reached $14.72. What is the amount of the book-tax difference in 2017 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Accepted Answer

$137,500 unfavorable

Question 20

In 2016, Datasoft Inc. received $350,000 in dividends from CSLabs Inc. Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000. What is Datasoft's DRD assuming it owns 15% of the CSLabs Inc. stock?

Accepted Answer

$196,000,

Exam 16: Corporate Operations

Income that is included in book income, but excluded from taxable income, results in a favorable, permanent book-tax difference.

Three brothers each own 20% of the stock in three corporations. Because no single brother owns more than 50% of a corporation, the tax law would not treat the corporations as a controlled group.

Which of the following statements regarding controlled groups is false?

A corporation with an AMTI of $400,000 will have all of its AMT exemption phased-out.

Which of the following statements is false regarding corporate estimated tax payments?

Accrual-method corporations cannot deduct charitable contributions until they actually make payment to the charity.

Netgate Corporation's gross regular tax liability for 2016 was $95,375. What was its taxable income?

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain other deductions).

A corporation may carry a net capital loss back two years and forward 20 years.

Which of the following is unnecessary to allow an accrual-method corporation to deduct charitable contributions before actually paying the contribution to charity?

VitalJuice Corporation reports the following schedule of prior year taxes it owed: What is VitalJuice's tax liability for Year 4?

Both Schedules M-1 and M-3 require taxpayers to identify book-tax differences as either temporary or permanent.

WFO Corporation has gross receipts according to the following schedule: If WFO began business as a cash-method corporation in Year 1, in which year would it have first been required to use the accrual method?

Urban Corporation receives tax-exempt income from Denver municipal bonds. All the proceeds from the bonds were used to fund public projects. In computing adjusted current earnings in its AMT computation, Urban must add back the interest income from its municipal bonds.

Which of the following statements regarding book-tax differences is true?

For corporations, which of the following regarding net capital losses is true?

In 2016, Datasoft Inc. received $350,000 in dividends from CSLabs Inc. Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000. What is Datasoft's DRD assuming it owns 15% of the CSLabs Inc. stock?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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